Employee Choice Takes Effect: 2.35 Million Workers Can Switch

This article is a rewrite of a report from November 2012.

Years in the making, MPF semi-portability (the Employee Choice Arrangement) launched: 2.35 million workers could move accrued benefits to a favoured trustee. The MPFA rushed a public register onto its website for licence checks. Experts advised: hold fire, watch for a few months.

How big is it?

HK$257.5 billion movable — 67% of the total. MPF assets stood at HK$384.3 billion as of June 2012; the newly movable amount added about HK$100 billion. Registered intermediaries reached 33,000, 70% from insurance; average fees 1.74%.

How to avoid scams?

Check the public register. The MPFA’s new register: type an intermediary’s name and instantly see the company, licence status and supervising body. Unlicensed names return no match.

What did experts advise?

No rush. Unionist Chan Hing-sang: one trustee switch a year, unlimited fund-combination switches; study fund rankings and three-to-five-year returns and fees first; cheap doesn’t mean rewarding — consider acting in next year’s second quarter. HKIFA’s Sally Wong: Australia’s experience saw under 10% switch early; near-retirees in bond mixes needn’t move.

What perks did rivals offer?

AIA topped up. After Invesco’s fee cuts and Manulife’s rebates, third-ranked AIA offered bonus-unit rebates: 0.2% annual management-fee rebate for new clients permanently, 0.45% in year one for preserved accounts moved together (seven cheapest funds excluded). AIA put the true market-absence risk at about a week.

What is the lesson from 2012?

1 November 2012 was the first day workers got a choice. For over a decade, bosses picked the trustee; from this day, at least your own share was yours to move. Experts’ “hold fire” wasn’t “don’t care” — it was: with choice comes the right to choose slowly.